LEGISLATION AND POLICY SPACE How the JPEPA Will Restrict Future Legislation and Policy Space by Attys. Golda Benjamin and Tanya Lat, Initiatives for Dialogue and Empowerment through Alternative Legal Services, Inc. (IDEALS) Legislative Power Under the Constitution, legislative power is primarily vested in the Congress of the Philippines. (Art. VI, S Philippine Constitution) Any treaty and international agreement entered into must therefore not derogate from such power vested in Congress by the Constitution. Unilateral Tariff Elimination The legislative power of Congress includes the power to impose tariff rates, import and export quot border measures. (Art. VI. Sec. 28 (2), Phil. Const.) This power may be delegated by law to the President, but must be exercised within specified limits and within the framework of the national development program of the Government. Under the JPEPA, the Philippines has committed to eliminate tariffs on practically all products (with the exception of rice and salt) within 11 years from the date of entry into force of the JPEPA. (See Annex 1, Philippine schedule for Trade in Goods.) Such tariff elimination is for all intents and purposes irreversible, and eliminates its, availability as a tool for the country’s economic development. In effect, by unilaterally eliminating tariffs, the Executive Branch has deprived Congress ofits inherent power to set tariffs as part of national policy. Restrictions on Legislative Power The Philippine Constitution provides that “the State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities.” (Art. XII, Sec. 10, par. 3) However, the Investments chapter (Chapter 8) of JPEPA imposes further restrictions on Congress’ legislative power: © Art. 89 of the JPEPA obligates the Philippines to automatically accord national treatment to all Japanese investors and to practically all aspects of their investments. Compared to Japan's investment agreements with other countries like Korea and Japan, the JPEPA has the most extensive list of covered investment activities that the Philippines must extend protection to. It even includes two more activities not found in Japan's agreements with other countries; namely, possession and liquidation. Compared with the Philippines! previous bilateral investment agreements, the JPEPA removes the important phrase that allows for national legislative flexibility: “...with respect to investments which are made in accordance with the legislation of that Contracting State.."" © Art, 93 of the JPEPA prohibits the Philippines from imposing performance requirements over and above those commitments made previously under the WTO Agreement on Trade-Related Investment Measures (TRIMS Agreement). ©. The reservations made by the Philippines for existing measures (Annex 7, 1B) are limited mostly to reservations for national treatment and are also incomplete. Most of these reservations touch only on limitations imposed by the Constitution, and do not mention limitations set down by other laws. (Annex 7), Japan's reservations are extensive; covering reservations on national treatment, most-favoured nation, and performance requirements, EEE OLLEGISLATION AND POLICY SPACE ‘This means that the Philippines is relinquishing its prerogative to enforce such laws in the future, since it did not expressly make reservations for these in the JPEPA. Under Art. 4 of the JPEPA, the Philippines would then be obligated to amend or repeal such laws and regulations which would necessarily affect the JPEPA's implementation and operation, especially with respect to investor rights. © While in theory the Philippines is not precluded from enacting future legislation relating to investments and other related matters, this will no longer be possible given the kind of reservations that the Philippines made. © For future protection, part of Annex 7 shows that Japan is protecting its own legislative space by saying that itreserves the right to adopt or maintain any measure relating to investment. The Philippines, in its reservations for future measures, indicates provisions of present law. © Art. 95 which covers expropriation and compensation makes the Philippines extremely vulnerable to suits from investors, even if the measures enacted by the Philippine government were pursuant to its exercise of police power. The NAFTA arbitral decisions on the similarly worded chapter on expropriation and compensation, indicate that practically any regulatory measure that destroys investor-backed expectations can be deemed expropriation, and therefore always subject to payment of compensation. National environmental regulatory measures, taxation measures, and measures for importation bans are buta few of the Measures that have been classified as expropriations in NAFTA cases. Expropriation cases have included claims against States amounting to $19 million to $201 million. ee